CurrencyChinese Yuan (CNY)Work Week40 hoursEmployer Taxes up to 43%
Hire in China
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The number of products labelled “made in China” is simply overwhelming but the People’s Republic of China is not only the world’s biggest player when it comes to manufacturing. The country is also very popular with international companies intending to grow their remote teams.
Not only are wages in China quite low but legal conditions are quite favourable for employers as employee protection as well as health and safety obligations are not as strict as in other countries. In many cases, employing in China means low employment costs and low wages in exchange for highly-qualified workers.
*Due to the extension of these public holidays, the Chinese Government has introduced additional working days on the weekends around these celebrations.
Under China’s Labor Contract Law, employers have to provide their employees with a written employment contract no later than one month after the employee’s first day at work – different regulations apply for part-time employees. Employment contracts in China can be concluded for a fixed-term, for an indefinite term or for the period required to complete an agreed assignment. The agreement should contain at least the following information:
Identification of both parties
Date of commencement and employment duration
Job description including position, duties and responsibilities
Basic salary as well as other compensation or benefits
Total number of holidays
Protective measures at workplace
Additional legal requirements
Information on probation periods, confidentiality, training etc. are optional.
The length of the probation period depends on the length of the respective employment contract:
contract length between three months and one year: maximum one month probation
contract length between one and three years: maximum two months probation
contract length more than three years: maximum six months probation
Working Hours and Breaks
Under normal conditions, an employee’s standard working week should be 40 hours divided into five eight-hour days. It is mandatory to give employees at least one proper rest day per week.
Overtime work is possible under certain conditions but should not exceed one hour per day – three hours per day in special cases but limited to 36 hours within one month. Any work performed beyond standard working hours is to be remunerated as follows:
150% of normal wages on standard working days
200% of normal wages on rest days
300% of normal wages on public holidays
It is common practice in China to pay employees on a monthly basis.
There is no national minimum wage in China. Instead, each Chinese province defines its own minimum wages. It is not unusual that minimum wages even vary within one single province, taking into account the cost of living in specific areas.
The highest minimum wage rate applies in Shanghai where the current rate is set at CNY 2,480 per month.
Sick leave and sick pay in China depend on the employee’s length of service with his or her current employer as well as on his or her overall working experience. Sick leave entitlements range from three up to 24 months and sick pay rates lie between 60% and 100% of the employee’s usual salary.
Although not legally required, many employers grant their employees an annual bonus equal to one month’s salary which is usually paid out just before the Chinese New Year, i.e. in early February.
Taxes and Social Security Contribution
Employees and employers in China are subject to the following tax and social security contribution rates (as of 2021):
25% corporate tax rate
13% VAT (standard rate)
individual income tax rates range from
3% to 45% *
Social security contribution rates in China are location-dependent. In Beijing, for example, contributions amount to 43% of the employee’s salary including:
10.8% healthcare and maternity fund
0.8% unemployment insurance
0.4% employment injury insurance
12% housing fund
Social security contribution rates in China are location-dependent. In Beijing, for example, contributions amount to 22.2% of the employee’s salary including:
An employee’s annual leave entitlement depends on his or her length of service. Employees with one or more years of service receive five paid vacation days each year. Employees with a length of service between ten and twenty years gain ten days of annual leave and those who have been working for more than 20 years are entitled to 15 paid days off each year.
In addition, there are seven official public holidays, some of which stretch over several days.
Maternity Leave and Paternity Leave
Maternity leave in China is 98 days of which 15 can be taken before birth. In case of difficult or multiple births, it is possible to extend maternity leave by another 15 days. During maternity leave, the employee receives maternity benefits from the Chinese social security agency. Depending on the province, employers may be required to make a contribution to maternity allowances.
Despite there being no national law providing for paternity leave, fathers can claim paid leave on the occasion of their child’s birth under provincial regulations. In most provinces, paternity leave is between 15 and 30 days.
Chinese labour law does not provide for additional parental leave. However, female employees can claim breastfeeding leave which allows them to reduce their daily working time by one hour until the child is twelve months old.
Additional Leave and Benefits
It is common practice among employers to grant (paid) additional leave – usually one to three days – in the following cases:
In addition to employment termination by default – i.e. in case of a fixed-term contract – resignation and mutual agreement, an employee may be dismissed due to one of the following reasons (non-exhaustive list):
staff reduction and other objective reasons making the employee redundant
summary dismissal due to gross misconduct
breach of employment contract
employee’s incapability to work as a result of illness or injury
The minimum notice period for both employee and employer is 30 days. Pay in lieu of notice is possible.
Except in those cases where dismissal is based on employee behaviour, employees in China are entitled to severance pay which is based on the employee’s length of service:
up to six months of service: half a month’s salary
between six months and one year: one month’s salary
over one year: one month’s salary for each completed year of service
Hiring in China?
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